WSJ piece on live hog price which mentions 1998 "debacle" ..................
November 26, 2005
U.S. Hog Market May Climb Back During December
Hefty Supply, Plant Closing Damped November Prices; 'Little Dose of 1998' Debacle
By CURT THACKER
DOW JONES NEWSWIRES
Several bearish factors for the U.S. hog market came together in mid-November and led to a sharp drop in cash prices that continued into Thanksgiving week, but most market analysts and industry participants expect a rebound in December.
According to the U.S. Department of Agriculture, cash hog prices based on national weighted-average afternoon quotes set a month-to-date high of $61.43 per hundredweight Nov. 11 and have declined since then. In just eight days, prices fell $6.43, or 10%, to a 22-month low of $55 per hundredweight Wednesday. However, Friday the USDA reported that the weighted-average value rose 1.7% to $55.96.
Contributing to the earlier drop were hefty seasonal hog supplies, the loss of a double-shift hog processing plant in Iowa for nearly four days before the Thanksgiving holiday and record-large live weights in the Iowa-southern Minnesota region, which is the largest hog production area in the U.S.
Chicago Mercantile Exchange December lean hog futures prices tumbled to 60.62 cents a pound Monday, the lowest level since Oct. 28. December lean hog futures Friday edged up 0.70 cent to 62.55 cents in shortened trading hours.
New York futures markets, including gold and crude oil, were closed Friday.
Dan Vaught, an analyst with A.G. Edwards & Sons in St. Louis, referring to the early-week declines in futures and cash prices, said, "We're getting a little dose of 1998." Hog supplies in 1998 were huge and packers were operating the plants at capacity levels, but for a few weeks there were more hogs available than the plants could handle. "The market [in 1998] crashed and burned," he said.
In December 1998, cash hog prices fell into the single digits, in dollars per hundredweight, and hit the lowest levels since the Great Depression.
"However, the situation -- as it is today -- is by no means as serious, or will be as extended, as it was back then [1998]," Mr. Vaught said. The reduction in daily slaughter capacity this time was temporary, and the USDA estimated Tuesday's slaughter back at more than 400,000 head. Also, a strike at a Canadian pork plant forced about 25,000 more hogs a week into the U.S. at that time.
Market analysts and industry officials say that while domestic demand has slipped some this year, international sales of U.S. pork remain very strong amid continuing import bans on North American beef and with bird-flu concerns in Asia and parts of Eastern Europe. Mr. Vaught and some other analysts predict that hog prices have reached, or are near, a cycle low.
Write to Curt Thacker at curt.thacker@osterdowjones.com
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